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RBI announces monetary policy with key rates unchanged; industry disappointed
Reserve Bank of India announced its first monetary policy today, post the formation of the new government at the Centre. The country's central bank bank has kept the key rates i.e. repo and reverse-repo rates unchanged. The RBI announced that the benchmark repo rate, at which it lends to commercial banks would remain unchanged at 8.0% and the cash reserve ratio would be kept at 4.0%, after the meeting in financial capital Mumbai.

RBI chief Raghuram Rajan said it was appropriate to leave rates unchanged and allow the impact of three rate hikes since last September to feed through the system and offset inflationary pressure.

Reacting on the monetary policy, industry body Assocham's President Rana Kapoor said that the issue at this point of time is cost of borrowing and not money availability.

“While SLR cut by 50 bps will make available a little more money for lending by banks, the issue facing the industry at this point of time is not so much of liquidity but the cost of borrowing. With robust foreign inflows, the system has ample liquidity,” said Kapoor.

Somehow, the chamber chief said, the country must move towards a regime of benign interest rates if we have to see consumer demand pick up and industrial growth revive. It is also time that we aggressively tamed the inflationary pressures through measures other than the monetary tools.

It is an issue of supply management and not so much of supply constraints in so far as the food prices are concerned. We hope that with prospects of improved governance with the new government in saddle, the food economy will be managed better giving more headroom to the RBI to move the interest rates lower, added Kapoor.

For India Inc, the Assocham president said, policy review does not really bring any cheers at this point of time and therefore only have to wait for some more time.

Industry body FICCI while expressing its disappointment on the latest monetary policy announcement said that now the industry would wait for the Union Budget for the revival of the growth.

“The Reserve Bank of India has maintained status quo on key policy rates. FICCI feels an accommodative stance would have given better encouragement to investments amid early positive sentiments after the new government took charge and is pursuing a growth agenda. After this policy, our hopes are singularly hinged on the forthcoming Union Budget for reviving growth”, said Sidhharth Birla, President, FICCI.

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